Roger Williams University Law Review
Volume 22
Issue 1 Vol. 22: No. 1 (Winter 2017)
Article 5
Winter 2017
Franchise Tax Board of California v. Hyatt: A Split
Court, Full Faith and Credit, and Federal Common
Law
Jonathan M. Gutoff
Roger Williams University School of Law, [email protected]
Follow this and additional works at: http://docs.rwu.edu/rwu_LR
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Gutoff, Jonathan M. (2017) "Franchise Tax Board of California v. Hyatt: A Split Court, Full Faith and Credit, and Federal Common
Law," Roger Williams University Law Review: Vol. 22 : Iss. 1 , Article 5.
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United States Supreme Court
Surveys: 2015 Term
Franchise Tax Board of California v.
Hyatt: A Split Court, Full Faith and
Credit, and Federal Common Law
Jonathan M. Gutoff
On first glance, a case involving a longstanding state tax
dispute is probably not one to excite much interest for a general
audience. And indeed, Franchise Tax Board of California v.
Hyatt1 did not attract much attention in the general news media.
Nonetheless, the case contains, if not something for everyone, a lot
more than tax issues. The case involves issues of state sovereign
immunity, the consequence of the death of Justice Scalia and an
evenly split Supreme Court, and relations among the States, and,
properly understood, the law making power of the Supreme Court.
I.
THE CASE
The case saw the second trip of Gilbert P. Hyatt to the
Supreme Court as a respondent on a grant of certiorari to the
Supreme Court of Nevada,2 though his second time there
undoubtedly left him less satisfied than his first.3 Sometime in
 Professor of Law, Roger Williams University School of Law.
1. (Hyatt II), 136 S. Ct. 1277 (2016).
2. See Franchise Tax Bd. of Cal. v. Hyatt (Hyatt I), 538 U.S. 488, 490
(2003).
3. California statutes provide complete immunity from suit to its tax
248
2017]
STATE SOVEREIGN IMMUNITY
249
the early 1990’s, Hyatt moved from California to Nevada. While
Hyatt claimed he moved in September of 1991,4 after
performing an investigation and audit the Franchise Tax Board
determined that he had only left California in April of 1992, and,
as a result, Hyatt owed California over $10,000,000 in taxes,
interest, and penalties.5 It was not the determination of owed
taxes, however, that brought Hyatt’s dispute with California to
the United States Supreme Court, but the process of the
investigation and audit.6
Hyatt claimed that the Franchise Tax Board’s
investigation, much of which occurred in Nevada, was
tortious and sued in Nevada state court.7 As I will discuss
further below, in a 1979 case, Nevada v. Hall, the Court held
that states are not immune from suits in the courts of other
states.8 Nonetheless, as a result of the Eleventh Amendment9
and a series of decisions from the late 1990’s and the first
decade of this century, save for actions granted by Congress to
enforce the Fourteenth Amendment10 and the Bankruptcy
Clause,11 states have a constitutional immunity from suits by
private parties in the federal courts,12 federal administrative
agencies,13 and in their own courts.14 In the first trip of the
Franchise Tax Board and Hyatt to the Supreme
agency for torts committed by its employees, but Nevada does not allow its
own agencies to be immune from suit for intentional torts of its employees.
The United States Supreme Court held that the Nevada courts did not have
to give full faith and credit to California’s laws, and thus did not have to
substitute California law for its own laws, because Hyatt’s Nevada residence,
and the fact that the tortious conduct at issue occurred in Nevada,
established significant contacts such that Nevada’s interest in the matter did
not make it unfair to apply Nevada law. Id. at 493–95.
4. Hyatt II, 136 S. Ct. at 1279.
5. Id. at 1279–80.
6. Hyatt I, 538 U.S. at 488.
7. Hyatt II, 136 S. Ct. at 1280.
8. 440 U.S. 410, 410 (1979).
9. U.S. CONST. amend. XI.
10. U.S. CONST. amend. XIV, § 5 (granting Congress “the power to enforce
by appropriate legislation the provisions” of the Fourteenth Amendment); see
Fitzpatrick v. Bitzer, 427 U.S. 445, 456 (1976).
11. U.S. CONST. art. I, § 8, cl. 4 (authorizing Congress to enact “uniform
Laws on the subject of Bankruptcies throughout the United States.”); see
Cent. Va. Cmty. Coll. v. Katz, 546 U.S. 356, 375, 377 (2006).
12. See Seminole Tribe of Fla. v. Florida, 517 U.S. 44, 54 (1996).
13. See Fed. Mar. Comm’n v. S.C. State Ports Auth., 535 U.S. 743, 760
(2002).
14. See Alden v. Maine, 527 U.S. 706, 745 (1999).
250 ROGER WILLIAMS UNIVERSITY LAW REVIEW [Vol. 22:248
Court,15 California claimed that the Full Faith and Credit
Clause16 required that Nevada apply the statutory immunity
granted by California to its officers and agencies in Nevada state
court.17 The Supreme Court of Nevada rejected California’s
argument, and the United States Supreme Court affirmed.18
According to the Court, so long as one state’s statutes did not
display “‘a policy of hostility to the public Acts’ of a sister [s]tate,”
a state was free to apply its own laws to suits against other states
in its own courts.19
On remand, a Nevada jury awarded Hyatt nearly
$500,000,000 in compensatory damages, punitive damages, and
fees.20
The Nevada Supreme Court reduced the award to
$1,000,000, but upheld the finding of liability and remanded for
consideration of damages for intentional infliction of emotional
distress.21 The California Franchise Tax Board petitioned for
certiorari, arguing that California should be immune as result of
Nevada’s adoption of the discretionary-function exception to
sovereign immunity found in the Federal Tort Claims Act; that
Nevada v. Hall should be overruled; and argued that, even if it
were amenable to suit in Nevada courts, Nevada was obligated to
provide California agencies the same level of immunity—a
damage cap of $50,000—as it provided to its own.22 The Supreme
Court granted certiorari on the second and third questions.23 The
Court split evenly on whether to overrule Hall, and affirmed
without opinion.24 As to California’s immunity, the Court agreed
with California, but not without dissent, and reversed and
remanded for Nevada courts to give California’s Franchise Tax
Board the same immunity.25
In light of the death of Justice Scalia in February of 201626
15. Hyatt I, 538 U.S. 488 (2003).
16. U.S. CONST. art. IV, § 1.
17. Hyatt I, 538 U.S. at 491–92.
18. Id. at 493–94.
19. See id. at 499 (quoting Carroll v. Lanza, 349 U.S. 408, 413 (1955)).
20. Hyatt II, 136 S. Ct. 1277, 1280 (2016).
21. Id.
22. See Petition for Writ of Certiorari at i, Hyatt II, 136 S. Ct. 1277 (2015)
(No. 14–1175).
23. Cal. Franchise Tax Bd. v Hyatt, 135 S. Ct. 2940, 2940 (2015).
24. Hyatt II, 136 S. Ct. at 1279.
25. See id. at 1283.
26. See, e.g., Adam Litpak, Antonin Scalia, Justice on the Supreme Court,
Dies at 79, N.Y. TIMES (Feb. 13, 2016), http://www.nytimes.com/
2017]
STATE SOVEREIGN IMMUNITY
251
the even split on the Court was hardly surprising; however, it
reveals something not only about the dynamics of an evenly split
Court, but also about the current state of sovereign immunity
doctrine. The ruling on the extent to which Nevada had to treat
the California Franchise Tax Board as it would a Nevada agency
may not be of widespread importance, but it is the way in which
the discussion was framed that is instructive on the Court’s
attitude toward federal common law. I will briefly consider both
aspects of the case.
II. SOVEREIGN IMMUNITY OF A STATE
A. In Federal Court and Its Own Courts
1.
What Does Article III Say?
The second section of Article III of the Constitution lays out
the limits of jurisdiction of the United States courts. One of the
nine heads of jurisdiction, the types of cases and controversies to
which the federal judicial power extends, is “[c]ontroversies . . .
between a [s]tate and a Citizen of another [s]tate.”27 In the
Judiciary Act of 1789, Congress exercised that power by giving the
Supreme Court and the Circuit Courts, then the federal trial
courts for diversity cases, concurrent jurisdiction over those
suits.28 In Chisolm v. Georgia the Supreme Court considered a
case brought by a creditor of Georgia to collect a debt as an
original action in the Supreme Court.29 Claiming that a state, as
a sovereign, could not be sued without its consent, Georgia refused
to appear.30 By a vote of four to one, the Court disagreed.31 The
majority of the Court reasoned that Article III section 2 had
removed the States’ sovereign immunity in federal court.32
2.
What Does the Eleventh Amendment Say?
About two years after Chisolm, the States ratified the
2016/02/14/us/antonin-scalia-death.html.
27. U.S. CONST. art. III, § 2, cl. 1.
28. An Act to Establish Judicial Courts of the United States, ch. 20, sec.
11, 1 Stat. 73, 78 (1789).
29. 2 U.S. 419, 420 (1793).
30. Id. at 469.
31. Id. at 476.
32. There is no opinion of the Court. The justices issued their opinions
seriatim.
252 ROGER WILLIAMS UNIVERSITY LAW REVIEW [Vol. 22:248
Eleventh Amendment, which provides, “The Judicial power of the
United States shall not be construed to extend to any suit in law
or equity, commenced or prosecuted against one of the United
States by Citizens of another State, or by Citizens or Subjects of
any Foreign State.”33 The language of the Eleventh Amendment
appears to strip federal courts of the power to hear diversity
actions where a state is a defendant, or, perhaps, any action,
whatever its basis, where a state is a defendant in a suit brought
by a citizen of a different state. In Hans v. Louisiana, however,
the Court announced that the extent of state sovereign immunity
was not limited to the text of the Eleventh Amendment.34
3.
The Nature of Constitutional Sovereign Immunity Outside the
Eleventh Amendment
In Hans, a citizen of Louisiana brought an action against the
State to recover for the State’s default on its bonds.35 Hans
brought his action in federal trial court pursuant to the fairly
recent grant of federal question jurisdiction to the federal trial
courts,36 and the Constitution’s prohibition against states
impairing contracts.37 Because the case involved a state being
sued by one of its own citizens, the text of the Eleventh
Amendment did not prohibit Hans’ action. However, the Supreme
Court decided that underlying the Eleventh Amendment is a form
of state sovereign immunity, which was not abrogated by Article
III, and which Congress did not abrogate by granting federal
question jurisdiction.38
After Hans, the question remained
whether Congress, pursuant to any of the powers the Constitution
grants, could enact a law that would abrogate sovereign
immunity.
In 1989, a fractured Court upheld the assertion of jurisdiction
under an act of Congress39 in Union Gas v. Pennsylvania.40
Writing for three other members of the Court, Justice Brennan
concluded that state sovereign immunity was simply a creature of
33. U.S. CONST. amend. XI.
34. 134 U.S. 1, 15 (1890).
35. Id. at 1.
36. 28 U.S.C.A. § 1331 (Westlaw through Pub. L. No. 114–244).
37. U.S. CONST. art. I, § 10, cl. 1.
38. Hans, 134 U.S. at 15.
39. Superfund Amendments and Reauthorization Act of 1986, Pub. L. No.
99–499, § 113, 100 Stat. 1613 (1986).
40. 491 U.S. 1, 7 (1989).
2017]
STATE SOVEREIGN IMMUNITY
253
federal common law, which Congress could abrogate pursuant to
any of its powers.41 Justice Scalia, also writing for three other
members of the Court, disagreed,42 and Justice White joined the
in the result of affirming jurisdiction over Pennsylvania, but wrote
separately to explain that he would not have found the
Congressional intent in the statute clear enough to abrogate state
immunity.43 Whatever confusion caused by the fractured Court in
Union Gas would last less than a decade.
In Seminole Tribe of Florida v. Florida,44 an action brought
by the Tribe against Florida for Florida’s alleged failure to
negotiate with the Tribe over the establishment of casinos as
required by the Indian Gaming Act,45 the Court overruled Union
Gas. By a vote of five to four, it held that the state sovereign
immunity set out in Hans was of constitutional dimension, and
Congress had no power under the Commerce Clause46 to abrogate
that immunity in federal court.47 Following Seminole Tribe, in
Alden v. Maine,48 the Court considered a case brought by a state
employee in state court for alleged violations of the Fair Labor
Standards Act.49 Again, by a five to four vote, the Court
concluded that, pursuant to the Commerce Clause, Congress had
no power to force states to answer for federal suits in their own
courts.50 And this is where the matter stands today. The Eleventh
Amendment gives states immunity from suits in federal court, and
states cannot be sued in their own courts without their consent.51
This leaves the question of what happens when a state is sued in
the court of another state.
41. Id. at 15.
42. Id. at 33 (Scalia, J., dissenting).
43. Id. at 45 (White, J., concurring).
44. 517 U.S. 44, 66 (1996).
45. See 25 U.S.C.A § 2710(d)(3)(A) (Westlaw through Pub. L. No. 114–
244).
46. Seminole Tribe, 517 U.S. at 65 (focused on Congress’ power under the
Indian Commerce Clause, but the Court’s holding applies equally to
Congress’ power to regulate interstate and international commerce).
47. Id. at 64.
48. 527 U.S. 706, 711–12 (1999).
49. 29 U.S.C.A §§ 201–219 (Westlaw through Pub. L. No. 114–244).
50. Alden, 527 U.S. at 732–33.
51. See U.S. CONST. amend. XI; Seminole Tribe, 517 U.S. at 54, 64.
254 ROGER WILLIAMS UNIVERSITY LAW REVIEW [Vol. 22:248
B. Actions Against States in the Courts of Other States
1.
Rarity of States as Private Defendants
The Constitution does contemplate states being sued by other
states, but such actions are part of the Supreme Court’s original
jurisdiction.52 The question as to what should happen when a
private plaintiff sues a state in the courts of the plaintiff’s state
has not called for a lot of resolution. Prior to the expansion of
personal jurisdiction in International Shoe Co. v. Washington
Office of Unemployment Compensation and Placement53 a party
would only be subject to a state’s jurisdiction where the party was
present in the state, where the party had property in the state, or
where the defendant consented to suit.54 It is not very often that
a defendant state would have found itself in this predicament.
2.
The Court Allows States to be Sued in the Courts of Other
States
The issue eventually came before the Court in Nevada v.
Hall55 in the context of a car crash. There, the Court considered
whether Nevada could claim immunity from a California statecourt alleging damages caused by a Nevada bus in California.56
The Court concluded that the Eleventh Amendment and the cases
discussing inherent state sovereign immunity were concerned only
with the jurisdiction of the federal courts, and that the level of
comity to be granted to Nevada was purely a matter of California
law.57
52. See U.S. CONST. art. III, § 2, cl. 2; 28 U.S.C.A. § 1251(a) (Westlaw
through Pub. L. No. 114–244) (endowing the Supreme Court with exclusive
and original jurisdiction); see David Hatton & Jay Wexler, The First Ever
(Maybe) Original Jurisdiction Standings, 1 J. OF LEGAL METRICS 19, 21–23
(2012) (reviewing the Supreme Court’s original jurisdiction and providing the
standings of how various states have done against each other; fans of the Big
Ten will be pleased to learn that, according to the authors, Minnesota (5-0),
Michigan (6-1), Ohio (4-1) and Wisconsin (5-2) top the standings. Those who
prefer the SEC might be disappointed by the fact the last two places are held
by Louisiana (2-7), Arkansas (1-5) and Tennessee (0-5)).
53. 326 U.S. 310, 316–17 (1945).
54. See Pennoyer v. Neff, 95 U.S. 714, 723–24, 733 (1877).
55. See 440 U.S. 410, 411 (1979).
56. Id. at 411, 414.
57. See id. at 420–21, 426–27.
2017]
3.
STATE SOVEREIGN IMMUNITY
255
The Arguably Anomalous Position of Hall
Hall was decided well before Seminole Tribe and its numerous
progeny explained that state sovereign immunity was part of the
constitutional structure.58 In addition, after Seminole Tribe and
Alden, it leads to an odd situation given Article III’s efforts to
protect states and state interests from local prejudice by providing
a federal forum. The Eleventh Amendment, Seminole Tribe, and
Alden mean that, although a state is not subject to suit in federal
court or its own courts without its consent, it may be subject to
suit, at least under state law, in the courts of another state.59
Moreover, an action against a state in the courts of another state
could not be removed, because, as a result of the Eleventh
Amendment, such an action would not be one over which the
district courts would have original jurisdiction.60
4.
Justice Scalia Exits—Hall Stays
It was the anomalous position of Hall that led California to
ask that it be overruled. Seminole Tribe and its progeny have
been supported by a constant five to four majority of the court,
including Justice Kennedy.61 Indeed, there is reason to believe
that soon Hall is headed for the scrap heap of judicial history.
The case we concern ourselves with here was argued on December
7, 2015 and would have gone into conference the following Friday,
December 11th. Justice Scalia died on February 13, 2016. The
decision in Hyatt was handed down on April 19, 2016. Writing for
the Court, Justice Breyer explained that, because the Court was
equally divided, the decision of the Nevada Supreme Court to
follow Hall was affirmed.62 However, as Bloomberg BNA’s sharpeyed Nicholas Datlowe has reported, when the opinion was first
released, Justice Breyer’s opinion was labeled with the header
“Opinion of Justice Breyer.”63 The next day a corrected version
58. E.g., Alden v. Maine, 527 U.S. 706, 714 (1999).
59. See U.S. CONST. amend. XI; Alden, 527 U.S. at 712, 732–33 (1999);
Seminole Tribe of Fla. v. Florida, 517 U.S. 44, 64, 67–68 (1996).
60. See 28 U.S.C.A. § 1441(a) (Westlaw through Pub. L. No. 114–244).
61. E.g., Fed. Mar. Comm’n v. S.C. State Ports Auth., 535 U.S. 743, 745–
46 (2002); Alden, 527 U.S. at 706; Armstrong v. Exceptional Child Ctr., Inc.,
135 S. Ct. 1378, 1381 (2015).
62. Hyatt II, 136 S. Ct. 1277, 1279 (2016).
63. Nicholas Datlowe, Minor Error, Major Effect, US LAW WEEK BLOG
(Apr. 21, 2016), http://www.bna.com/minor-error-major-b57982070195/.
256 ROGER WILLIAMS UNIVERSITY LAW REVIEW [Vol. 22:248
was issued with the Breyer’s opinion headed “Opinion of the
Court.”64 As Datlowe explained, had Justice Breyer been assigned
to write the majority, his opinion would have always been headed
“Opinion of the Court.”65 Moreover, had the majority decided to
overrule Hall, which is a good guess as to what would have
happened had Justice Scalia lived to take part in the final decision
of the case, there would have been no need for the “opinion of the
court” to have reached the question of the extent to which Nevada
was obligated to apply its own immunity law to California.66 The
case would have simply been reversed and remanded with the
instruction to dismiss the action. Therefore, it is a good guess that
Justice Breyer’s opinion was originally written not as a
concurrence in part with the decision to reverse the judgment and
remand the case back to Nevada, but a dissent from the part of
the decision to overrule Hall.67
In any case, Hall remains. To the extent a plaintiff can gain
personal jurisdiction over a state in the courts of another state,
the defendant state is not constitutionally immune from the
suit.68 Of course, the evenly split Court cannot last forever. As
such, either Hall or other aspects of the Court’s state sovereign
immunity jurisprudence will be up for consideration when Justice
Scalia’s replacement is seated. On the other hand, whatever
happens to the composition of the Court, the law of state sovereign
immunity will not change right away and state courts may
continue to be faced with the issue of what law to apply when
another state is sued.
III. THE LAWS APPLIED TO SUITS AGAINST OTHER STATES: A FEDERAL
COMMON LAW OF INTERSTATE RELATIONS
A.
The Full Faith and Credit Clause and the Application of the
Defendant State’s Law of Immunity to Out of State Agencies
In its opinion in Hall, the Court not only allowed Nevada to
be sued in the California state court, but also considered whether
California courts had to apply Nevada’s limitation on damages to
64.
65.
66.
67.
68.
Id.
Id.
Id.
See id.
See Hyatt II, 136 S. Ct. 1277, 1279–80 (2016).
2017]
STATE SOVEREIGN IMMUNITY
257
state agencies, then set at $25,000.69 Nevada argued that the Full
Faith and Credit Clause of the Constitution70 required California
to do so.71
Most lawyers encounter the Full Faith and Credit Clause as
first-year students in the context of judicial proceedings, and
learn, if anything, that states are required to give the same effect
to out of state judgments as the rendering state would.72
However, the text of the Full Faith and Credit Clause applies to
more than judgments. As such, states are required to give full
faith and credit to “the public Acts, Records, and judicial
Proceedings of every other [s]tate.”73 In Hall, the Court rejected
the view that the Full Faith and Credit Clause required California
to apply Nevada’s limit on liability, concluding that, in contrast to
giving effect to another state’s judgments, a state could take its
own public policy into account.74
On the first trip of the California Franchise Tax Board and
Hyatt to the Supreme Court, California argued that the Full Faith
and Credit Clause required Nevada to apply California statutory
law exempting the Franchise Tax Board from liability.75
California lost. Citing Hall the Court explained that “[t]here is no
principled distinction between Nevada’s interests in tort claims
arising out of its university employee’s automobile accident, at
issue in Hall, and California’s interests in the tort claims here
arising out of its tax collection agency’s residency audit.”76 The
Court concluded that Nevada was free to substitute its own public
policy—that of compensating tort victims.77
On his next trip to the Court, Hyatt’s winning streak stopped
at one. The Court concluded that while Nevada courts did not
have to apply California’s statutory immunity to California and its
agencies, it did have to apply Nevada’s own form of immunity,
which limits recovery against the state and its agencies to
$50,000.78
69.
70.
71.
72.
73.
74.
75.
76.
77.
78.
Nevada v. Hall, 440 U.S. 410, 416, 420–21 (1979).
U.S. CONST. art. IV, § 1.
Hall, 440 U.S. at 421.
See id.
U.S. CONST. art. IV, § 1.
Hall, 440 U.S. at 422–23.
See Hyatt I, 538 U.S. 488, 498 (2003).
Id.
Id. at 494.
Hyatt II, 136 S. Ct. 1277, 1283 (2015).
258 ROGER WILLIAMS UNIVERSITY LAW REVIEW [Vol. 22:248
The Court explained that by failing to give California agencies
the same level of immunity it would give to its own agencies,
Nevada was showing a constitutionally impermissible “policy of
hostility” toward other states.79 That is, it was okay for Nevada to
say “our policy of compensating tort victims is more important
than California’s policy of protecting its agencies from private
suits,” but Nevada could not say “protecting Nevada agencies is
more important than protecting California agencies.” According to
the Court, discriminating against California state agencies would
be unfair, and therefore contrary to the demands of the Full Faith
and Credit Clause.80
B. Textualism and the Full Faith and Credit Clause
In his dissent, Chief Justice Roberts complained that while
the majority’s resolution “seem[ed] fair,” the Full Faith and Credit
Clause does not mention “fairness.”81 It has only to do with how
states are to treat the public acts and records of other states.82
Once the Court had concluded that a Nevada court could proceed
to judgment against a California agency (as the Court concluded
in Hall) and that Nevada did not have to apply California’s grant
of immunity from suit to its agencies (as the Court concluded in
Hyatt I), the Full Faith and Credit Clause did not require Nevada
to do anything else in particular with application of its own law to
California.83
Of course, the Chief Justice was right; the text of the Full
Faith and Credit Clause does not say anything about fairness or
any other standard beyond “full faith and credit.” However, as the
majority explained, since the Court has concluded that the Full
Faith and Credit Clause does not always require one state to
apply the law of another state where a party for another state may
be involved, the Court has developed a jurisprudence to determine
what a court should do when faced with another party.84 In
addition, there are many areas of constitutional law, notably the
law of state sovereign immunity, that lack firm textual grounding.
79.
80.
81.
82.
83.
84.
Id. at 1281 (citations omitted).
Id. at 1281, 1283.
Id. at 1284 (Roberts, C.J., dissenting).
Id. at 1285–86.
Id. at 1286–87.
Id. at 1282–83 (majority opinion).
2017]
C.
STATE SOVEREIGN IMMUNITY
259
Hyatt as an Example of the Federal Common Law of
Interstate Relations
More importantly, the dissent and the majority’s response
miss the point. The requirements of “fairness” are not found in
the Full Faith and Credit Clause, but rather in the constitutional
requirement that the Supreme Court formulate a law of interstate
relations. The first clause of Article III, section 2, brings
“[c]ontroversies between two or more [s]tates” within the federal
judicial power,”85 and the second clause puts those controversies
within the original jurisdiction of the Supreme Court.86 While it
is arguable from the text of Article III that Congress can strip the
Supreme Court of original jurisdiction in matters between
states,87 Congress has put such suits within the original
jurisdiction of the Supreme Court since 1789.88
In determining state against state actions, the Supreme Court
has come up with a common law of interstate relations that mostly
deals with the law of property boundaries. 89 This has been
uncontroversial, as it would not make sense for the Court in
adjudicating disputes between states to be bound by the law of one
state or another. Moreover, the formulation of a federal common
law based on a jurisdictional grant is not unique to state against
state controversies. It is found in labor management relations90
pursuant to the Labor Management Relations Act’s grant of
federal jurisdiction over labor management contracts;91
international humanitarian law92 pursuant to the Alien Tort
Statute’s grant of federal jurisdiction over “torts only in violation
of the law of nations;”93 and maritime law94 pursuant to the
85. U.S. CONST. art. III, § 2, cl. 1.
86. Id. § 2, cl. 2.
87. Id. It is at least arguable that the Exceptions and Regulation Clause
in U.S. CONST. art. III, § 2, cl. 2, which allows Congress to regulate the
jurisdiction of the Supreme Court, applies only to the appellate jurisdiction of
the Court.
88. 28 U.S.C.A. § 1251(a) (Westlaw through Pub. L. No. 114–244); Hatton
& Wexler, supra note 52, at 20.
89. See, e.g., New Jersey v. New York, 523 U.S. 767, 784 (1998).
90. See, e.g., Textile Workers of Am. v. Lincoln Mills of Ala., 353 U.S.
448, 456–57 (1957).
91. See 29 U.S.C.A. § 185(a) (Westlaw through Pub. L. No. 114–244).
92. See, e.g., Sosa v. Alvarez-Machain, 542 U.S. 692, 694–95 (2004).
93. 28 U.S.C.A. § 1350 (Westlaw through Pub. L. No. 114–244).
94. See, e.g., Exxon Shipping Co. v. Baker, 554 U.S. 471, 501–02 (2008).
260 ROGER WILLIAMS UNIVERSITY LAW REVIEW [Vol. 22:248
Constitutional and statutory grant of jurisdiction over “cases of
admiralty and maritime jurisdiction.”95 The law formulated by
the Supreme Court in those cases is federal law, and, pursuant to
the Supremacy Clause, it is binding on state and federal courts in
any dispute in which it may apply.96 Thus, for example, to the
extent it applies, the federal law of state boundaries will apply in
a private action between two landholders in a private action
concerning property rights.97 Therefore, to the extent that the
application of a forum state’s law granting immunity to out-ofstate agencies involves an issue that could give rise to a state
against state action, the law that would apply in that action is
federal common law subject to formulation by the Supreme Court.
Counsel for Hyatt recognized this possibility during oral
argument:
If . . . let’s assume, hypothetically, that . . . California
brought an original action in this Court, and it said we
want an injunction ordering . . . Nevada to apply its
damages cap to all suits against California in Nevada
courts . . . . What would the basis in Federal law be for
that lawsuit? . . . [E]ven if the Court had the power, some
Federal law, generally—maybe Federal common law,
which is always something the Court, I guess, can create
if necessary—why would they particularly choose this
rule?98
Of course, Hyatt argued that there was no need to formulate a
federal common law of comity between states, especially one that
would require Nevada to treat California agencies as Nevada
would treat its own.99
Once, however, one recognizes that the Court would have
jurisdiction to determine the hypothetical action by California
against Nevada, it is apparent that the Court has to come up with
some rule of decision. That rule might be “Nevada courts can
treat California and its agencies as a private litigant,” or, “Nevada
95. U.S. CONST. art. III, § 2, cl. 1; 28 U.S.C.A. § 1331(1) (Westlaw through
Pub. L. No. 114–244).
96. See Garrett v. Moore-McCormack Lines, 317 U.S. 239, 245 (1942).
97. See Potomac Shores, Inc. v. River Riders, Inc., 219 Md. App. 29 (Md.
2013).
98. Transcript of Oral Argument at 47–48, Hyatt II, 136 S. Ct. 1277
(2015) (No. 14-1175).
99. Id.
2017]
STATE SOVEREIGN IMMUNITY
261
courts have to treat California and it its agencies as it would treat
Nevada and its agencies,” or, perhaps, some other rule.
Nevertheless, there needs to be a basis for the decision. Once it is
acknowledged that the Supreme Court needs to formulate a basis
for the decision in the hypothetical action brought by California,
then “fairness” becomes a perfectly good basis for formulating a
rule decision. Of course, there may be other considerations, such
as Nevada’s dignity as a sovereign state, in formulating a rule of
decision. One can imagine the Court having decided this case the
other way, but in that case the Court would have announced a
rule of decision that state courts are free to treat other states and
their agencies as private parties. One would hope that the Court
would have at least considered “fairness” in whatever rule of
decision it formulated. To claim that “fairness” has nothing to do
with the Court’s decision is to ignore that the Supreme Court has
an affirmative role in the formation of the law of interstate
disputes, and federal common law in general.
CONCLUSION
After Hyatt, we know a couple of things. States are still liable
to be sued in the courts of other states, and, when a state is sued,
the court hearing the action will have to treat the defendant state
and its agencies as it would treat its own state and agencies.100
This brief summary has brought into focus things that were
true before Hyatt: the Supreme Court is equally divided on,
among other issues, state sovereign immunity. The law’s
development in that area, as well as others, will depend on the
next appointment to the Court, and the Supreme Court will
continue to come up with rules of decisions that involve interstate
disputes. What role “fairness” will play in those rules remains to
be seen.
100.
See Hyatt II, 136 S. Ct. 1277, 1281 (2015).